In Virgin Media Limited and Virgin Media Payments v HMRC [2020] TC07536, the First Tier Tribunal (FTT) ruled that the supply of payment handling services to customers was taxable and not VAT exempt.
Virgin Media supplied cable TV, broadband and telephone services (the “media services”) to residential customers.
- The customers paid for the media services to a wholly-owned subsidiary of Virgin Media.
- The bill to the customers who did not pay by Direct Debit included a monthly payment handling charge of £5.
Virgin Media contented that the supply was exempt as the transfer or receipt of, or any dealing with money. HMRC argued that there was a single taxable supply of media services and thus no exempt services were provided. If there was a separate supply, such a supply was an ancillary component of a single taxable supply that it was taxable in its own right.
Virgin Media appealed to the FTT. The case was complex. It came down to whether the supply was a single or multiple supply. The FTT agreed with HMRC and dismissed the appeal, holding:
- That there was a single supply made to the customer.
- That the £5 handling charge was an integral part of the overall supply.
- If not integral, the handling charge was an ancillary supply such that it took on the VAT treatment of the substantive supply which was standard rated.
Comment: In general, financial services and payment handling charges are exempt from VAT.
Links
Mixed supplies: Single or Multiple supply?
Is a mixed supply a single or multiple supply for VAT purposes? What tests and case law apply?
Good and services for VAT (subscriber)
What are goods and what are services for VAT? The answer may have an impact on the time of supply, the place of supply and in some cases the rate of the supply. The answer is not always as straightforward as it may seem.
External link
Virgin Media Limited and Virgin Media Payments v HMRC [2020] UKFTT TC07536
